Development agency seen as model for this province

Development agency seen as model for this province

Stephen Lund’s team cold-called senior executives of Research in Motion a little more than two years ago in a bid to entice the maker of the iconic BlackBerry to set up an office in Halifax.

At the time, the Nova Scotia capital wasn’t even on RIM’s list of potential sites for expansion. But Lund, chief executive of Nova Scotia Business Inc., brought a small investment attraction team and Nova Scotia Premier Rodney MacDonald to RIM’s headquarters in Waterloo, Ont., in the fall of 2005 to speak with the company’s top officials.

In November of that year, Nova Scotia Business Inc., an arms-length government agency, announced with provincial and federal officials that RIM would set up a new technical support centre in the city, employing roughly 1,200 people.

The deal came with a $19-million investment from the provincial government and considerable work. But it was an achievement for an agency that is seen by some economic development experts as a model that New Brunswick would do well to adopt.

Nova Scotia Business Inc., or NSBI, is a government agency that is said to take the politics out of investment attraction. It is run by a private-sector team, accountable to a private-sector board of directors.

Lund, a native of Saint John, can hire and fire employees based on performance and the organization offers financial rewards to those that do well. It is run much like a business that is driven by results.

Established in 2001, NSBI has attracted top global firms, including Citco Fund Services, a leader in hedge fund services; Marsh, a renowned risk and insurance services firm; and Lockheed Martin, a major defence firm.

A five-year organizational review shows NSBI has helped generate more than 18,000 new jobs with average salaries that top $50,000.

“We think our record is as good as any place in North America and our results compare with Ireland, which is seen as a leader,” says Lund. “Everything we do runs through a filter that says whether an investment is the best thing for the province. We stay out of the politics and we focus on doing business.”

The province’s universities offer a reliable talent pool, the taxation regime provides a “reasonable” cost of doing business and technology firms are supported by solid infrastructure, says Lund. These strengths, he says, allow the agency to focus on the information technology, financial services and defence sectors.

“We compete with India, China, the Philippines, the (European) eastern bloc countries and now South America,” says Lund. “And even though we’ve had success in the first five years, there is no guarantee that will continue – markets change continually,” he continues.

“Just the impact of the Canadian dollar, the war on talent, the increased competition we’re seeing around the world, makes it difficult for us or any other province, including New Brunswick, to compete.

“But I haven’t seen a better model that can get it done.”

And that model can – and should – be easily adopted in New Brunswick, says Donald Savoie, an economist with Université de Moncton.

Business New Brunswick, NSBI’s counterpart in this province, is a government department run by a cabinet minister and a bureaucracy.

“And in any government department, performance is always something they grapple with, but in the case of NSBI, performance is easily measured and managed,” says Savoie.

“If you’re in the business of promoting economic development, you better deliver the goods. If not, it’s better that you’re not there.”

If a New Brunswick agency built on the NSBI model achieved a similar record, general wages and tax revenues would increase, improving the province’s overall quality of life, says David Murrell, an economist with the University of New Brunswick Saint John.

“I’m in favour of aggressive recruitment of corporations, if it can be done on a cost-effective basis,” he says. “And it seems that we may want to emulate the successes that they’ve had at Nova Scotia Business Inc.”

Murrell cautions the agency would have to operate with significant oversight, given that it would manage public funds.

“The key would be to have a watchdog keeping an eye over their expenses,” he says. “But the new taxes that would be raised and the higher-paying jobs that could come from this would be good for the economy.”

Business New Brunswick spokesman Ryan Donaghy says the department is not considering adopting the NSBI model. He says the department is in the process of establishing a dedicated investment unit that promises to be aggressive in drawing new business to the province.

Business New Brunswick already boasts a strong record of investment attraction, says Donaghy, pointing to IBM, Xerox, Rogers, UPS, and Molson Breweries as examples of firms the department has been able to lure.

And the way NSBI operates represents bad economic policy, says Charles Cirtwill, acting president of the Atlantic Institute of Market Studies, a Halifax-based economic think tank.

The agency uses provincial tax dollars to provide incentives to major firms as a method to draw them to the province, which places their competitors already operating in the province at a disadvantage, says Cirtwill.

“If your economic development policy is to put subsidies in the hands of business then NSBI is probably a better model than most,” he says. “They take a serious look at the business case, they conduct an analysis and look at ways to get the biggest bang for their dollar.

“But they’re basically putting in place targeted support for an individual corporation that’s not available to their competitors in the same jurisdiction.”

Savoie, however, says the firms NSBI has attracted, such as RIM and global information technology firms CGI and Keane do not pose a significant competitive threat to local companies.

“It’s a winning model and I think Lund has to be congratulated; he’s take the model and made it work,” says Savoie. “New Brunswick would be well advised to look at it, and knock on Lund’s door and say, ‘it’s time for you to come home’.”